PPPRA Insists FG Subsidises Petrol
EVEN with crude oil sold below $50 per barrel and at N87 per litre of petrol in Nigeria, the Petroleum Products Pricing Regulatory Agency (PPPRA) insists government still subsidizes the product.
Executive Secretary of the PPPRA, Farouk Ahmed, who gave the clarification in Abuja Friday, stated that the price of crude oil dropped to a point where the open market price of petrol also fell to a level where government considered it appropriate to relieve some of the burden imposed on Nigerians by the knock-on effect of the dwindling price of crude oil on the economy.
He explained that the price of crude oil averaged $62 in December 2014 and dropped to an average of $50 per barrel in the first half of January 2015.
Ahmed added that it was after a consistent and diligent monitoring of the trend, since the beginning of the current drop in crude oil price that government was able to confirm its ability to reduce the pump price of petrol, commensurate with the amount announced.
He explained that even at the lowest crude oil price of $47.23 recorded on January 16, 2015, the open market price of petrol was about the same as the erstwhile price of N97 per litre . “What this means is that at the new price of N87 per liter, government is still subsidizing the pump price of petrol”, Ahmed said.
On the argument that the price of crude oil has reduced by about 50% and so the pump price of petrol must reduce in the same ratio, he explained that crude oil price is only one of the several components in deriving the pump price of petrol.
“There is no linear relationship between the price of crude oil and the pump price of petrol”, he averred, adding that when the price of crude oil reached its peak of $114.26 per barrel on June 18, 2014, the open market price of petrol was N157, but government still maintained the regulated price of N97 per litre and subsidized the difference of N59.51 per litre.
The PPPRA boss noted that in determining the amount of reduction on the pump price of petrol, government is mindful of the impact that an upward swing in the price of crude oil would mean in the amount of subsidy exposure.